'I give up'

Living in hard-hit Orange County, Calif., Kelly Reeves has seen her home's value plummet so severely that she now owes $180,000 more on her home than it's worth.

Her adjustable-rate mortgage, which carries a 6.75% rate, is due to reset in January, leaving her guessing as to what she'll pay next year.

Reeves, who is a media consultant, has made several attempts to refinance to a fixed-rate loan but always hits a dead end.

She applied for a modification with her lender Bank of America. And after nine months, the bank finally offered to reduce her rate but only if she bought private mortgage insurance. (Banks often require borrowers to buy mortgage insurance, or PMI, when they have less than 20% equity in their home).

The insurance cost so much per month, however, that it would wipe out much of the savings she would have realized from refinancing. So she walked away from the deal.

Reeves then met with half a dozen mortgage brokers and loan officers, all of which shut her down because she was underwater on her mortgage.

She has since given up. When her loan resets, her new rate will depend on interest rates. If her loan reset today, her rate would probably be around 4.5%, lowering her payments by more than $650 a month.

"I'm going to wait it out," she said. "Hopefully interest rates will stay as low as they are now."